I understand that sections 26 and 27 have something to do with the termination of capital allowances. Could the Minister give us as brief and as non-technical a summary as possible of these provisions?
SECTION 26.
Question proposed: "That section 26 stand part of the Bill".
As part of the reform of corporation tax between 1988-92, accelerated capital allowances for expenditure incurred on industrial buildings and plant and machinery were phased out in tandem with the reduction in the standard corporation tax rate from 50 per cent to 40 per cent. However, transitional arrangements were introduced to cater for pipeline cases. Thus, section 51 of the Finance Act, 1988, provided that 100 per cent accelerated capital allowances would continue to be available in certain cases, including the following: machinery and plant or industrial building provided for under contracts entered into or before budget day, 1988, and machinery or plant or an industrial building provided for a project approved by the IDA on or before 31 December 1988.
Section 26 of the Bill amends section 51 of the Finance Act, 1988, so as to bring to an end the entitlement to 100 per cent accelerated capital allowances for these categories of assets.
Is the purpose of section 27 somewhat similar to section 26?
Yes.
Is the IDA agreeable to this? It looks like it is an eminently reasonable provision. If a person has not done this by now, giving him a further two years to do so seems to be fairly reasonable.
I can confirm that the IDA was consulted and, in fact, was anxious to have this matter cleared and taken off the books.
Question put and agreed to.
Sections 27 and 28 agreed to.
SECTION 29.
I move amendment No. 37:
In page 53, subsection (1)(a), line 26, to delete "Minister for Finance" and substitute "Minister for Enterprise and Employment in consultation with the Revenue Commissioners".
I understand that this section will give tax relief for certain foreign branch profits, which I am sure has been pressed upon the Minister by a number of sources, including possibly the IDA and Forbairt and it looks to be a good idea. I made this objection when we were dealing with charities and deeds of covenants. Third World charities are at the approval of the Minister for Foreign Affairs and I made a similar point about education covenants needing the approval of the Minister for Education. This amendment makes the same point but I am making it stronger in this regard. My amendment substitutes "Minister for Enterprise and Employment in consultation with the Revenue Commissioners" for "Minister for Finance." This will be a strong power for the Minister for Finance to take unto himself. In this era of openness, transparency and accountability so beloved of us all in Irish life — none more so than myself — it is important that no Minister for Finance, with regard to tax law, would leave himself open to accusations that he has favoured one company over another.
In the past couple of years, both inside and outside of the House, we have had tremendous debates — calling them debates might stretch the definition of the word "debate"— and diatribes on the Ministers and certain politicians who were accused of moving in certain circles, taking powers unto themselves and favouring their own friends. If we do not amend this section and if certain Deputies on the Government side of the House ever find themselves in Opposition again, they will be lowering the boom — as we have heard over the past six or seven years — on any politician who occupies the position of Minister for Finance. That is as sure as night follows day. This section gives the power totally to the Minister for Finance. It would be reasonable and sensible for the Minister not to take this power totally unto himself. I argued all of yesterday on other particular areas and I also recognise the dichotomy and my schizophrenia on giving powers to Ministers. I prefer to have Ministers making decisions rather than bodies over which I have no say, but in the area of tax, I have to counsel caution. The powers in this section would give enormous power to the Minister for Finance.
The purpose of the section, that a company gets tax relief for certain foreign branch profits, is a good one. The IDA have perhaps lobbied on this issue. A least one other European country has a provision in this regard. I have nothing against the purpose of the section because it would be worthwhile and it might encourage Irish businesses to set up more foreign branches and make more profits, which would ultimately benefit the Irish people. There was a similar idea back in 1988. In section 41 of the Finance Act, 1988, the idea was that if Irish companies brought home their dividends from their subsidiaries and those dividends were to be used to create employment in this country, the companies would pay no additional tax. That was heralded by almost everybody and lauded and applauded by all sides of the House. Everyone said it was going to do the devil and all. To the best of my knowledge, only two companies have availed of that section. Perhaps section 29 of this Bill will have a greater success than section 41 of the 1988 Act has had. To qualify under section 41, one had to have an "approved investment plan" but it did not work. Hopefully, this particular section will work.
I am sure that the Revenue Commissioners, in advising the Minister for Finance on the drafting of this section, will have tried to think of all potential loopholes. It is a provision that would be open to a certain amount of tax avoidance. One would have to be a genius to think up a scheme where most of a your company's profits would come from your foreign branches. I am sure that the Revenue Commissioners have made some provisions in that regard. The purpose of my amendment is to substitute "Minister for Enterprise and Employment in consultation with the Revenue Commissioners" rather than giving the power to the Minister for Finance. I am putting it forward to protect the good name of not alone the current Minister but all future holders of the office.
Chairman
Including yourself.
Hopefully.
Whatever about the Minister for Enterprise and Employment, I would not be agreeable to the question of the Revenue Commissioners having this responsibility, because it would blur their role. The Revenue Commissioners are responsible for collecting revenue. It would be crossing the line to put them in the position of authorising people as well.
The Deputy is correct in saying that this proposal will generate considerable employment. It has come on foot of a marketing exercise undertaken by the IFSC and the IDA and we are confident that one particular company will establish a fairly substantial presence. The presence of that company in that location will have a very good demonstration effect on others. The guidelines stipulated include a target level of about 100 new jobs over the three year period and a permanent capital investment of the order of £150 million in order to qualify. I have no difficulty with what the Deputy is saying. However, he should be aware that the Minister for Finance had that monitoring role in 1988 and that we are maintaining that precedent. Approximately five companies came back as distinct from two and the total value was approximately £82 million. If the Deputy wishes I can come back to him on Report Stage. The Minister for Enterprise and Employment, with the agreement of the Minister for Finance, could have this role. I know precisely what the Deputy is saying and I can see the wisdom of not giving a Minister exclusive responsibility in this area.
That is it.
I see it as political insurance.
I also take the Minister's point. I like to have Ministers accountable rather than supposedly independent bodies. I accept what the Minister says. I would withdraw the amendment if he could do something about this on Report Stage.
The IDA are the people in the field. They do the marketing of the IFSC abroad.
So perhaps the Minister for Enterprise and Employment could act in consultation with the Minister for Finance or the IDA.
As it is a financial measure, because of the substantial tax breaks it would be with the agreement of the Minister for Finance, but the initiating role could perhaps be given to another Minister. There would be two Ministers rather than one. That is the thrust of what the Deputy is saying.
That is the purpose of my amendment. I am willing to withdraw it in favour of a change made by the Minister in order that a future incumbent of the office, when invited before a committee like this or some other committee, can say that two Ministers were involved in the decision, that there was more openness in that regard. I have a question then about the section itself. We might as well deal with it now. Section 29 (3) states that the Minister draw up guidelines. Will these guidelines be published?
Chairman
Is the Deputy referring to section 29?
Yes. Could the Minister say whether the guidelines will be published?
They will be carved in stone in the quays of the Custom House Docks.
That is all I wanted to know.
Amendment, by leave, withdrawn.
Section 29 agreed to.